Educated Entrepreneurs Succeed

Twice as many U.S.-born tech entrepreneurs start ventures in their 50s as do those in their early 20s, according to a new study by the Ewing Marion Kauffman Foundation and researchers at Duke and Harvard universities. The study analyzed U.S. engineering and tech companies founded from 1995-2005 - the most current decade of data.

The study, Education and Tech Entrepreneurship, found that most U.S.-born technology and engineering company founders are middle-aged, well-educated, and hold degrees from among a wide assortment of universities. Elite, highly ranked schools are widely represented among founders, but 92 percent of U.S.-born founders graduate from other universities, according to the study.

"While education clearly is an advantage for tech founders in the United States, experience also is a key factor," said Vivek Wadhwa, the study's lead researcher. "That a large number of U.S.-born tech founders have worked in business for many years also is important in understanding the supply of tech entrepreneurs," added Wadhwa, a Wertheim fellow at the Harvard Law School and an executive in residence at Duke University.

Education Affects Company Performance

While there are significant differences in the types of degrees obtained among entrepreneurs in the study and the time they take to start a company after they graduate, the study reveals a direct correlation between a founder's education and company performance.

In 2005, the average sales revenue of all startups in the sample was around $5.7 million, employing an average of 42 workers. Startups established by founders with advanced Ivy-League degrees had higher average sales and employment - $6.7 million and 55 workers, respectively.

The success of these groups contrasted sharply with startups established by founders holding high school degrees with average revenues and employees at $2.2 million and 18 workers, respectively.

Among other findings:

• The average and median age of U.S.-born founders was 39 when they started their companies. Only about 1 percent of U.S.-born founders of tech companies were teenagers.
• The vast majority (92 percent) of U.S.-born tech founders held bachelor's degrees, 31 percent held master's degrees, and 10 percent had completed PhDs.
• Nearly half of these degrees were in science, technology, engineering, mathematics, (STEM) and related disciplines. One third were in business, accounting and finance.
• U.S.-born tech founders holding MBA degrees established companies more quickly (13 years) than others. Those with PhDs typically waited 21 years to become tech entrepreneurs.
• The top 10 universities from which U.S.-born tech founders received their highest degrees are Harvard, Stanford, University of Pennsylvania, MIT, University of Texas, University of California-Berkeley, University of Missouri, Pennsylvania State University, University of Southern California, and University of Virginia.
• Nearly half (45 percent) of the tech startups were established in the same state where U.S.-born tech founders received their education.
  

Educating for entrepreneurship

"Because entrepreneurship is an indicator of economic vitality, this study raises important policy questions about how to foster greater tech entrepreneurship to boost economic growth," said Robert Litan, vice president of Research and Policy at the Kauffman Foundation. "Probably the most compelling fact in the study is that advanced education is critical to the success of tech startups."

The primary mission of the Kauffman Foundation is to do just that: improve education and advance entrepreneurship. The foundation was established to foster "a society of economically independent individuals who are engaged citizens, contributing to the improvement of their communities."

That mission is also shared by many organizations and leaders outside the United States.

The European Commission's Community Integrated Programme on Lifelong Learning, launched in 2007, supports activities in several Member States aiming to disseminate examples and raise the profile of entrepreneurship. Part of its campaign addresses university administrators, encouraging the teaching of entrepreneurship studies integrated across disciplines and underscoring the perspective of considering potential commercial benefits of scientists' work.

Mexico, with children and teen-agers making up one third of its population, is also investing in education, viewing its population demographic as a window of opportunity to enhance educational and economic opportunities. CONACYT, Mexico's national Council of Science and Technology, for instance, along with a number of science and technology organizations, are increasing the number of graduate programs in science, technology and math and have made available 20,000 scholarships for Mexican students.

• For more information about the study, visit kauffman.org/
  
• For information about European Commission resources for enterprise and industry, visit Enterprise Europe Online, ec.europa.eu/enterprise/library/ee_online/index_en.htm
  
• For information about CONACYT: conacyt.mx/

Posted May 19, 2008.